Home
Internet
Internet News
In Europe, online shopping could breathe new life into run down sheds

In Europe, online shopping could breathe new life into run-down sheds

By Reuters | Updated: 19 December 2012 17:10 IST

Owners of run-down warehouses on the edge of European cities could be sitting on goldmines because online shopping will force firms to seek distribution sites closer to customers who think speedy delivery is the norm.

In an increasingly fierce market where the likes of Amazon and Tesco pledge next-day or same-day delivery in specific time slots, warehouse rents could rise 40 percent over the next decade, property consultant CBRE said.

" Your industrial estate (near heavily populated areas) is the high street of the future," said Jonathan Holland, senior manager of Legal & General Property's industrial fund, which has 770 million pounds under management.

"We are very much looking at owning warehouses around major conurbations."

Some 43 percent of European Union citizens shop online, the European Commission said in February, up from 26 percent six years ago. They were expected to fuel a 12-15 percent growth in online sales across the region over the next five years, Forrester Research predicted.

Meanwhile, falling sales in austerity-hit Britain have forced retail property values down 28 percent since end-2007, data from Investment Property Databank showed. Values in euro zone countries fell 5 percent over the same period, CBRE said.

The yield, or annual rent as a percentage of the property value, on an industrial warehouse in a good location in Europe was 7.8 percent at the end of September compared with 5.8 percent for offices and 5.2 percent for shops, CBRE said.

Industrial yields depend more on lease length and the financial strength of the tenant than location, compared with offices or shops, and would "edge downwards" where demand from retailers was strong, CBRE said.

Retailers currently favour large sites in locations away from big population centres but with good transport links.

Amazon's huge warehouses include sites in Dunfermline, Scotland and Rheinberg, Germany while Marks & Spencer will open a warehouse the size of 11 soccer fields in Castle Donington, Leicestershire, next year.

That is changing, said Amaury Gariel, managing director of CBRE's European industrial logistics team.

Places such as Croydon, 16 kilometres south of central London, strewn with empty office blocks and suffering high unemployment, and Créteil, a scruffy suburb 19 km southeast of Paris, are examples of areas that could be targeted as they are close to major highways and large local workforces, Gariel said.

Warehouse rents at such sites could rise 20-40 percent over the next decade, he said, citing the greatest demand in areas near the biggest European cities such as Amsterdam, London and Paris for sites that have typically been used by mail delivery firms and food distributors.

A tendency by governments to prioritise such areas for homes would squeeze supply and push prices higher, he said.

Retailers and property investors are at "a tipping point" in waking up to the changing real estate map for distribution points in Europe, Holland said.

Amazon is on the hunt for about 20 sheds close to British cities while Asda and Tesco are opening so-called 'dark stores' - distribution centres which look like supermarkets on the inside but are closed to customers - across Britain.

Industrial developer Prologis is buying a "significant" amount of such sites near large towns and cities such as Milton Keynes in Britain and Hannover in Germany t o meet future demand, European president Philip Dunne told Reuters.

Retailers face obsolescence unless they recognise how the type of property they rent needs to change, Gariel said.

"We are on the first page of the story regarding new ways to distribute goods. What happens if retailers do not recognise it? Just look at what happened to the fax and the telegram."

Comments

For the latest tech news and reviews, follow Gadgets 360 on X, Facebook, WhatsApp, Threads and Google News. For the latest videos on gadgets and tech, subscribe to our YouTube channel. If you want to know everything about top influencers, follow our in-house Who'sThat360 on Instagram and YouTube.